I. & M. Smith (Pty) Ltd. since 1915
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I. & M. Smith (Pty) Ltd.

Coffee Market Report

29 Mar 2016
The latest Commitment of Traders report from the New York arabica coffee market has seen the Non Commercial Speculative sector of this market increase their net long position within the market by 243.13% during the week of trade leading up to Tuesday 22nd. March; to register a net long position of 19,523 Lots. This net long position which is the equivalent of 5,534,684 bags has most likely been since decreased, following the period of corrective profit taking and price fixation negative trade, which has since followed.

The latest Commitment of Traders report from the London robusta coffee market has seen the Speculative sector of this market decrease their net short sold position within the market by 51.76% over the week of trade leading up to Tuesday 22nd. March; to register a net short sold position of 10,553 Lots on the day. This net short sold position that is the equivalent of 1,758,833 bags is most likely little changed to perhaps have been slightly increased, over the period of mixed but overall marginally negative trade, which has since followed.

With the export registrations for the month in hand the General Statistics Office in Vietnam has estimated that the coffee exports of mostly robusta coffees for the month of March shall be 18.8% higher than the same month last year, at approximately 2.67 million bags. This estimate which is very much in line with the majority of trade forecasts within the country, would contribute to the countries coffee exports for the first six months of the present October 2015 to September 2016 coffee year to be 19.9% higher than the same period in the previous coffee year, at a total of 13.34 million bags.

Meanwhile and albeit that coffee is a relatively minor player within the overall exports for the country and accounting for only 2.036% of the value of total exports for the first quarter of this year, Vietnam has reported that the country experienced a modest trade surplus of 776 million U.S. dollars for the first quarter of 2016. This is against a 2.6 billion U.S. dollars trade deficit for the same period last year, which would seemingly indicate that the Vietnam economy is once again on a positive track.

The May on May contracts arbitrage between the London and New York markets broadened yesterday, to register this at 60.92 usc/Lb., while this equates to a 47.39% price discount for the London robusta coffee market. This arbitrage remaining relatively attractive to roasters in comparison to arabica coffee prices, with the good discount most likely due to remain in place for the foreseeable future, in line with steady robusta shipments out of Vietnam.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 732 bags yesterday; to register these stocks at 1,430,048 bags. There was meanwhile a larger in volume 975 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 36,115 bags.

The commodity markets were in receipt of improved economic data from the U.S.A. over the Easter weekend with the news that the country’s economy grew by 1.4% during the last quarter of last year, which is significantly better than the 1% factor that had been earlier estimated. But this is countered in terms of potential demand by the worries of slowing growth in China, the lack of growth in Japan and relatively modest growth of the Euro zone countries. The European markets were closed yesterday, but with the U.S. markets back at work and with a weaker dollar assisting to buoy spirits within some of the markets, to see the Sugar, Cocoa, New York arabica Coffee, Copper, Wheat and Corn markets had a day of buoyancy and the Natural Gas, Soybean and Silver markets steady, while the Oil, Cotton, Orange Juice and Gold markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.33% higher; to see this Index registered at 387.29. The day starts with a steady U.S. Dollar trading at 1.423 to Sterling and 1.118 to the Euro, while North Sea Oil is tending softer in early trade and is selling at 38.10 per barrel.

The London market was closed for the Easter Monday holiday yesterday, to leave the New York market to trade solo for the day and to kick off the day post the Easter Friday long weekend holiday on a follow through softer track. But as the afternoon progressed the market picked up in volume and recovered to move back into modest positive territory and setting a base for a mostly sideways positive track for the rest of the day’s trade. The New York market continued to end the day on a positive note and with 50% of the earlier gains of the day intact, but with the news of the substantial speculative net long within the New York market albeit perhaps somewhat reduced by the negative trade for the end of the shorter week last week and the charts looking somewhat flat to negative, one might expect to see little better than a hesitantly near to steady start for both markets for early trade today against the prices set in London on Thursday and in New York yesterday, as follows:

LONDON ROBUSTA US$/MT            NEW YORK ARABICA USc/Lb.

MAR 1458 – 22
MAY 1491 – 24                                      MAY 128.55 + 1.00
JUL 1522 – 24                                           JUL 130.55 + 1.05
SEP 1546 – 24                                           SEP 132.30 + 1.05
NOV 1565 – 25                                        DEC 134.00 + 0.95
JAN 1582 – 25                                        MAR 135.70 + 0.90
MAR 1604 – 25                                      MAY 137.10 + 1.00
MAY 1626 – 25                                        JUL 137.80 + 0.90
JUL 1650 – 25                                          SEP 138.30 + 0.80
SEP 1673 – 25                                         DEC 139.35 + 0.70